Minimum UTXO size is not a very consequential problem if you don't have to store them in perpetuity even when they're spent.
Discussion
Not sure if I understand correctly, but spent transactions affect the block size in perpetuity. It doesn't solve the number of unspent transactions that need to be included in each transaction, hence data size of each ongoing block.
Yeah but if all you need to keep is the UTXO set, then the blockchain doesn't really grow, it fluctuates on size, and approximates a steady state size over time. It only really grows with the size of the userbase. That's how mimblewimble worked on the original paper. With such a scheme transaction size is not really a factor, the overwhelmomg majority of the blockchain storage requirements is historical data.
Then it becomes a bandwidth problem. These are theoretical problems while crypto has little adoption for day to day transactions
Yes, it does become a bandwidth problem, but that problem is much less restrictive than long term storage of ancient irrelevant data. In the bitcoin block size debate, that was the problem for which it was argued that larger blocks lead to centralization. So it's not theoretical, the issue stemming from perpetual storage of all historical data has real world impacts today, bitcoin had to choose between decentralization and transaction throughput, and ironically choosing decentralization has led to choosing LN which has a network topology such that it trends to centralization. Ecash, an old technology that had problems nakamoto consensus solved, is now being necromanced to side step these problems also.
You have to solve the theoretical problems before adoption, or you find yourself looking for band aids and workarounds hastily when the time comes. Also as we have seen with bitcoin and the internet in general, distributed networks ossify with adoption, so its a race against that to solve them as well. You want to get to the natural limit imposed by your technology before you start employing external add ons to improve it, we aren't there with either bitcoin or Monero.